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Hog Options: Contract Redesign and Market Efficiency

Author

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  • Urcola, Hernan A.
  • Irwin, Scott H.

Abstract

This article tests the efficiency of the hog options market and assesses the impact of the 1996 contract redesign on efficiency. We find that the hog options market is efficient, but some options yielded excess returns during the live hogs period but not during the lean hogs period. Our findings indicate that the hog options market is efficient and is consistent with the new contract improving the efficiency of the market. However, other market conditions such as lower transaction costs during the lean hogs period can also contribute to reduce expected option returns during the latter period.

Suggested Citation

  • Urcola, Hernan A. & Irwin, Scott H., 2010. "Hog Options: Contract Redesign and Market Efficiency," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 42(04), November.
  • Handle: RePEc:ags:joaaec:100518
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    1. repec:oup:erevae:v:45:y:2018:i:1:p:121-142. is not listed on IDEAS

    More about this item

    Keywords

    hog options; mispricing perceptions; contract redesign; trading returns; Agribusiness; Agricultural Finance; Crop Production/Industries; Demand and Price Analysis; Farm Management; Financial Economics; Livestock Production/Industries; Marketing; Production Economics; Productivity Analysis; Public Economics; Research Methods/ Statistical Methods; C15; G12; G14; Q13;

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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